The Nasdaq Composite (^IXIC 1.99%) might finally be looking to gain some momentum in 2023, with investors desperately wanting a reversal from 2022's horrible performance. Sizable gains on Friday helped to build more positive sentiment, and the bullish move continued on Monday morning, with the Nasdaq rising 1.5% at midmorning.
Big-name companies get the headlines most of the time, but sometimes, news of mergers and acquisitions pushes a little-known company into the spotlight. That was true of not one but two small-cap stocks on Monday, as both Duck Creek Technologies (DCT) and Albireo Pharma (ALBO) made big gains on merger news. Read on for the details.
Duck Creek secures a big gain for shareholders
Shares of Duck Creek Technologies jumped 47% as of 10 a.m. ET. The move came as the insurance-technology specialist announced it had entered into an acquisition agreement with a well-known private equity company.
Vista Equity Partners agreed to acquire Duck Creek for about $2.6 billion. Under the terms of the all-cash deal, Duck Creek shareholders will get $19 per share for their stock, which is 46% above where the shares closed on Friday and 64% over its average price over the past 30 days.
Duck Creek CEO Michael Jackowski was pleased with the deal, expressing his pride in the company's ability to deliver cloud-based systems for property and casualty insurance companies that improve efficiency and make customers happier with their service experience. Duck Creek believes it will be able to do an even better job of meeting its commitment to P&C insurers in pursuit of growth.
For Vista, meanwhile, the Duck Creek deal is just the latest in a series of mergers and acquisitions in which the private equity company has taken advantage of lower valuations for cloud-based businesses. Vista believes its partnerships with other software companies serving the insurance industry gives it a potential competitive advantage in helping Duck Creek going forward.
Interestingly, Duck Creek's stock is now trading slightly above the $19 offer price, suggesting at least the possibility of a rival bid at a higher price. Given that the stock traded above $30 per share briefly in the past year, that wouldn't necessarily be unheard of, but shareholders will have to wait to see if another potential buyer comes out of the woodwork.
Albireo says "oui" to Ipsen
Shares of Albireo Pharma saw even bigger gains, soaring 90% Monday morning. The Boston-based biopharmaceutical company accepted a buyout bid from a French pharmaceutical company.
Ipsen (IPSEY 2.46%) announced that it had entered into a merger agreement with Albireo worth just over $950 million. Under the terms of the deal, Albireo shareholders will receive $42 per share in cash, and they'll also get a contingent value right potentially worth an extra $10 per share. That bonus payment will come if Albireo's candidate treatment for biliary atresia, Bylvay, receives approval from the U.S. Food and Drug Administration (FDA) before the end of 2027.
Bylvay has already received FDA approval for treating pruritus in patients with progressive familial intrahepatic cholestasis, which typically causes progressive liver disease and potential liver failure. Ipsen believes it can expand Bylvay's indications, as well as benefit from the expertise and intellectual property assets that Albireo brings to the table.
The jump in Albireo's stock implies investors are far from sure that Bylvay will be able to make good on the contingent value right payout. Nevertheless, the move has the shares trading at their highest price in eight years, and that has many shareholders feeling a lot better than they have recently.